Dealer Wont Deal???

Hi-TecDesigns

I'll preface this long post with the following: I've been known to be wrong in the past and I will gladly admit when I'm proven to be so (sorry, but proving me wrong will have to be more than "My uncle's mother's monkey told me so). My posts are rarely meant to be inflammatory, but they are often taken as such. As always YMMV...



Yes, I'm aware, but I'm questioning whether you understand the basic business principles in play here. Nissan's holdback is 2% of total invoice and their floor is 1% of total invoice, but the names are irrelevant. Call it a 2% 'dink' and a 1% 'cluck', it amounts to a chunk of money that Nissan returns to the dealer every quarter based upon the total invoice price of the cars they have purchased for that quarter. If the dealer sells the car the moment it hits the floor, 3% of the car's total invoice ends up on the dealer's bottom line. The longer the car sits there costing them interest, the smaller the bottom line is at the end of the quarter. Period.

To try and obfuscate where the money goes and how it is split up is just hand-waving. My post had nothing whatsoever to do with what the dealership pays to keep the lights on, healthcare, etc. as it has no effect on my point... the cost of them keeping the lights in no way has any affect on the difference in money between what they paid for it (quarterly) and what comes out of my pocket. Business expenses are an entirely different matter.

Yes, my numbers are made up as it's an example... but it's not funny accounting. Read what I wrote again. My example was about a dealer requesting $150 over invoice to sell me a car, whereas I wanted to only pay invoice. If he lets the car sit on the lot for a while and decides to sell me that car for my asking price (invoice) at a later date just to sell it, he's not only out the $150 over invoice he wanted initially, he's also out the interest he paid on that vehicle while it sat on the lot. If he sold me the car at my asking price when I initially offered it, he would only lose his requested $150 over invoice, not the same $150 plus interest. There's no magic there.

BTW, your use of the 1% floor as the dealer's cost per month in interest is incorrect. The 4% APR (i.e., annual, not monthly) was only partially arbitrary... I based it upon going car loan rates out there (though it could certainly be higher/lower based upon Nissan's desire to move a specific vehicle). At 4% interest, a $40K vehicle costs about $133/month in interest. Again, no magic there, pull out the calculator and punch in your own numbers. If your numbers are correct ($300/month interest for a 370Z), a dealership is getting that same $40k car at a 9% interest rate... the dealership would be better purchasing cars on their American Express Gold

And frankly, I don't consider this an attitude of entitlement. It's a matter of business negotiation. Both parties know what the product costs to roll off of the trailer and onto the showroom floor. I'm willing to pay 'X' and the dealer wants me to pay 'Y'. If 'Y' > 'X', then negotiation begins. Even if 'X' is below their cost, that doesn't make it a sense of entitlement, it simply means I don't consider the product worth what it cost the dealer to obtain it. 3% profit on the product for a dealer looks pretty good to me, but I'm not a moron... if I can get it for less than 3%, I'll take it. That's not a sense of entitlement, that's simple economics. The dealer always has the final word, so it's not like I'm robbing the guy.

Waiters expecting 20% tip on a meal because that's the "accepted" or "prevailing" rate, even if the service is poor... now that's a sense of entitlement. I pay around 20% as a matter of course because I feel that is typically a proper amount of remuneration for their services when you consider they live off of that money, but I'll give them 5% or less if they treat me like I'm bothering them during their vacation. If a waiter refused my tip for whatever reason, I'd be happy to oblige him. But it's up to me to give him something... he can't force it out of me.

And the numbers your friend is telling you about running the dealership simply do not make sense. $400k/monthly to run the place? Stop and think about those numbers for a second. Let's assume everyone who came in purchased their car for MSRP, letting the dealer make $2,500 profit off of each car sold... that's a huge assumption that would never hold in real life, but let's err on your side for the moment. Even in that case, this small dealer would have to sell 160 cars per month just to keep the doors open... that doesn't include profit for anyone. Now, I could understand if that $400k included new car purchases from the manufacturer and not include car sales in the figure, but as you can see, the numbers just don't add up. How many small dealerships do you know that sell 7+ cars/day (assuming closed on Sunday) every day at MSRP? And then you have to add in many more car sales per month so the dealer can actually make a profit over and above capitol costs and utilities/salaries.

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